Why Invest Across Private Market Asset Classes Consistently
September 7, 2022
As a family office company, we often hear questions about investing in private equity and its role in a family’s portfolio. Now, with the recent uptick in market volatility, the influx of inquiries has reached new heights. To help wealthy families gain insights into an often-confusing discipline, WE Family Offices Senior Investment Manager Matt Farrell, CAIA, tapped his expertise as WE’s leader in private investment research to answer a commonly asked question: How can we mitigate volatility and illiquidity in the private markets?
According to Farrell, one of the best practices to accomplish this is by achieving true diversification in your private market portfolio by investing across private asset classes consistently. Throughout this video, Farrell dives further into this topic by explaining why this is important for families and the specific goals this strategy should aim to achieve.
We hope that through this video, families will understand how investing across private asset classes offers diversification, creates exposure to certain return drivers and mitigates different risk factors. If you have any questions about investing across private market asset classes, please do not hesitate to contact us.
This video contains our current opinions and commentary that are subject to change without notice. Our commentary is distributed for informational and educational purposes only and does not consider the specific investment objective, financial situation, or particular needs of any recipient. Information contained herein has been obtained from sources we believe to be reliable, but we do not guarantee its completeness or accuracy. The information contained herein does not constitute legal or tax advice to any person. Please consult with your tax advisor regarding any taxation implications of the information presented in this presentation.
Private market investments are very risky and should only be incorporated in a portfolio after a careful assessment of the private investment’s offering materials and other information in consultation with your investment, tax, and legal advisors. Private market investments are often less liquid than traditional investments and redemptions from such investments often involve holdbacks and other restrictions on the timing of the redemption. Private placements, limited partnerships, hedge funds, funds of funds, or other types of these investment vehicles are typically illiquid, often for long periods of time, i.e., years. The terms governing these investments generally provide for significant redemption notice periods, lock-up periods, and holdbacks upon redemption, resale restrictions, and other provisions that preclude prompt liquidation of these investments Among the primary risks are long term illiquidity, lack of transparency, lack of control of the investment vehicle and investment decisions, and in the worst case, the total loss of your investment.
A particular illiquid fund’s returns typically will vary materially over the life cycle of the fund depending on the particular strategy of the fund; returns may be higher at the beginning, middle or end of the fund’s life cycle. So, the return profile of a private equity fund over the life of the fund will be very different that the return profile of a venture capital, distressed credit, or secondary illiquid strategy.
Certain statements contained herein may constitute “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe” or the negatives thereof or other variation thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions.